Mortgage rates climbed again last week following treasury yield gains in the wake of political turmoil and an unexpected jobs report spike.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.49%, jumping from 7.31%. A year ago at this time, the 30-year FRM averaged 6.66%.
The 15-year fixed-rate rose to 6.78% from 6.72%. A year ago, it averaged 5.90%
“Mortgage rates maintained their upward trajectory as the 10-year Treasury yield, a key benchmark, climbed,” said Sam Khater, Freddie Mac’s Chief Economist. “Several factors, including shifts in inflation, the job market, and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation. Unsurprisingly, this is pulling back homebuyer demand.”
Chaos on Capitol Hill is contributing to rates rising in the short term.
Kevin McCarthy’s (R-CA) ousting as House speaker has increased the likelihood of a government shutdown and spooked investors.
Redfin Economic Research Lead Chen Zhao said that political skirmishes have contributed to increasing interest rates “as the clash among House Republicans stemming from the narrowly missed government shutdown is causing volatility in stock and bond markets.”
Billionaire investor Ray Dalio noted the 10-year Treasury yield could rise to 5%, adding to a chorus of similar voices, including activist investor Bill Ackman and Blackrock CEO Larry Fink.
Adding to that stress, September’s jobs report found that the economy added a “stunning” 336,000 jobs last month, well above Wall Street estimates.
This could be bad news for the Federal Reserve, which may have to commit to further rate hikes to keep inflation in check.
Chief Economist Lawrence Yun of the National Association of Realtors issued a statement following the jobs report data. He said that since the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year.
“The job market continues to crank out jobs in high figures: 336,000 in September and over 4 million more compared to pre-COVID-19 March 2020. It does not mean all is well. The jobs data, however, is considered a lagging indicator as the firms will only make a job cuts decision after having cut costs in other areas,” Yun said.
“Commercial real estate, in particular, is flashing warning signs. Net leasing on retail and warehouse spaces is slowing. The office sector is continuing to bleed with rising vacancy rates. Community banks, many with exposures to commercial real estate, are watching their balance sheets carefully. The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue.”
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